How much car finance compensation could you get?

The Financial Conduct Authority (FCA) estimates the average car finance payout will be around £830 per eligible agreement. Your own figure could be higher or lower. It depends on the commission your dealer received, the interest you paid and how long ago you took out the finance. Nobody can tell you your exact amount until your lender works it out under the scheme rules.

Update, 3 October 2026: When this article was first published, the FCA had only consulted on its scheme. It confirmed the final rules on 30 March 2026. On 2 July 2026 the Upper Tribunal suspended parts of the scheme while it hears legal challenges, now due to be heard on 16–26 February 2027. Lenders don’t currently have to calculate or pay compensation. The FCA expects payments to start in 2027 if the scheme is upheld. The method below could change depending on the outcome.

How the FCA’s estimate has changed

• August 2025: after the Supreme Court ruling, the FCA said most people would probably get less than £950 per agreement.
• October 2025: its consultation estimated about 14.2 million agreements in scope and an average of around £700.
• March 2026: the final rules estimate about 12.1 million eligible agreements and an average of around £830.

The FCA expects £7.5 billion to be paid in total if 75% of eligible people take part.

How your payout is worked out

For most people the FCA uses what it calls a hybrid remedy. Your lender works out two figures:

1. The commission paid to the dealer or broker on your agreement.
2. Your estimated loss. This is an estimate of the interest you overpaid, based on a set reduction to your APR. The reduction is 21% for agreements taken out before 1 April 2014 and 17% for later ones.

Your redress is usually the average of those two figures. In about one case in three, a cap applies so that you don’t end up better off than if you had been treated fairly.

Some agreements get nothing, even if they’re in scope. Our article on who is eligible for car finance compensation lists the exclusions. Examples include very small commissions (£120 or less before April 2014, £150 or less after), interest-free deals, and cases where the lender can show no better deal was available.

The interest on top

Interest is added from the date you overpaid, or the date the commission was paid, until the date you’re paid. It is simple interest at the Bank of England base rate plus 1% a year, with a minimum of 3% a year. You can’t challenge the rate.

Claims of “8% statutory interest” on car finance payouts don’t reflect the scheme rules. For older agreements the interest can still be a meaningful part of the total, because it builds up over many years.

More than one agreement

The scheme looks at each agreement separately. If you changed cars on finance several times between 2007 and 2024, each agreement is checked against the rules on its own. Payouts on different agreements may land in the same or different tax years. Our guide to multiple PCP and HP claims explains what that means for tax.

Why the interest matters for tax

Generally, only the interest part of your payout is taxed. It counts as savings income, as our overview of whether car finance compensation is taxable explains. Lenders usually deduct basic-rate income tax (22% from 6 April 2027) from it before paying you, and your letter should show the gross interest, the tax taken and the net amount.

Whether you can get that tax back depends on your income that year. As general rules:

• non-taxpayers can usually reclaim all of it
• basic-rate taxpayers can usually reclaim up to £220 on payments from 6 April 2027 (£200 before), because of the £1,000 Personal Savings Allowance
• higher-rate taxpayers have a £500 allowance, so smaller amounts can often be reclaimed in full and larger ones in part or not at all

Other savings interest you earned that year uses up the same allowance. See our guide for higher-rate taxpayers for worked examples.

Overpaid tax is usually reclaimed on HMRC’s form R40, or through Self Assessment if you file a return. When you use our service, we check whether you’re likely to be owed anything, work out the right tax year, prepare and submit the R40 as your agent, and pay you the balance after our fees. Our how it works page explains the process.

Be wary of promised amounts

No one can promise you a figure before your lender has done the calculation. The FCA also warns that using a claims firm or law firm could cost you around 30% of your compensation. Complaining to your lender is free.

Next step

If you have already been paid, take the tax figure from your lender’s letter and try our eligibility calculator. It gives a general estimate based on the rules above.